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Ask CryptoVantage: Why Are There So Many Versions of Bitcoin?

There is only one bitcoin – but there are many imitators. You may occasionally come across cryptocurrencies that appear to be different “versions” of bitcoin. These are generally clones of bitcoin with slight modifications to the code, often having deceivingly similar names (such as “Bitcoin Cash”). The point of these cryptocurrencies is to use bitcoin’s reputation in order to take advantage of beginners, usually with the intention of the cryptocurrency founders enriching themselves at the cost of the beginners.

There are many different versions of Bitcoin but only one Bitcoin.

Some bitcoin clones are the result of disagreements within the bitcoin community surrounding the technical properties of the network. This article explains how bitcoin clones are created, common disagreements that spur the creation of new versions of bitcoin, and examples of the most popular clones to-date.

Bitcoin Clones

The protocol (rules) and code behind bitcoin are transparent and open to the public, which means that anyone can review the bitcoin software and submit requests to improve the code. But bitcoin’s nature as an open source software project opens it up to a world of critics who may decide to make their own version of the cryptocurrency. Some bitcoin clones are often referred to as “forks” because of the way the networks are deployed, but it is important to note that they aren’t forks in the way that the term “fork” was originally intended (as a chain split within bitcoin).

So how do bitcoin clones come to be? The creators of bitcoin clones modify Bitcoin Core – the software that runs the bitcoin network – to make certain protocol parameters different than bitcoin’s. This makes the new cryptocurrency incompatible with bitcoin, and any user running the software ends up on a different network (which is how it creates a new cryptocurrency).

Some bitcoin clones share bitcoin’s history up until a certain point in time, while others start with a brand new blockchain. Whichever method is chosen, it is clear that the new cryptocurrencies are not actually new “versions” of bitcoin but are instead cheap knock-offs using bitcoin’s reputation to their advantage.

Changing Bitcoin’s Properties

Aside from making money, the main motives for creating new versions of bitcoin come from technical disagreements surrounding the protocol rules. The bitcoin protocol includes a set of consensus rules which dictate characteristics of the bitcoin network. These consensus rules need to be agreed upon by the majority of the nodes that are running the bitcoin software. As described above, if a non-majority group wants to change one of these properties, they need to modify the software to create a bitcoin clone.

One example of a property included in the consensus rules is block size. There have been debates over whether bitcoin’s block size is adequately large enough for scaling. Certain groups argue that if the block size is increased (i.e. altering the bitcoin code so that each block contains more transactions in the same amount of time), then bitcoin transaction speeds will increase, thereby making bitcoin more scalable. These disagreements sparked the formation of one of the most popular clones of bitcoin yet: Bitcoin Cash. Similarly, Bitcoin SV is a clone of Bitcoin Cash with even larger block sizes.

Another distinguishing property of bitcoin is that it is a distributed ledger, meaning every node running bitcoin will have a copy of all previous transactions. To some, this is a major privacy concern, which caused a group to create Bitcoin Private. The intention of Bitcoin Private is to make a more private version of bitcoin that allows users of the cryptocurrency to keep their transaction history hidden from others.

Another dispute that has spurred the creation of a bitcoin clone is fair mining. Currently, bitcoin can be mined by application-specific integrated circuit (ASIC) miners, which are very powerful, specialized bitcoin miners. However, some believe that ASICs should not be allowed to mine bitcoin because it is unfair for those with less powerful mining set-ups. For this reason, Bitcoin Gold was created as an ASIC-resistant version of bitcoin.

Trade-offs

All of these so-called “improvements” to bitcoin come with hidden trade-offs. The examples discussed in the previous section have been around long enough to have all had trade-offs exploited:

At first glance it might seem like these bitcoin clones provide improvements over bitcoin, but if you dig a little deeper you can see that the “improvements” severely compromise the integrity of the cryptocurrencies. In general it is best to avoid bitcoin clones so you don’t suffer from one of the many attacks that they are vulnerable to.